Don’t Protect Your Home Alone

Remember the 1990 comedy Home Alone? Kevin thought his wish had come true. On the eve of a family trip to Paris, and after a night of ridicule that only younger siblings could understand, he wished that his family would disappear. Through a series of unlikely events that night and the next morning, his family left in a rush for their Paris flight without him. He woke up to an empty house, and he was elated. 

While wandering around his neighborhood, Kevin overheard a couple of con men discussing plans to burglarize his house. As soon as Kevin learned that his house was at risk, he devised a plan to protect it. He set clever booby traps that the con men would encounter upon breaking in. 

Kevin and his traps forced the burglars out, but the men cornered Kevin in a nearby vacant house. While the bad guys argued about how to extract their revenge, a neighbor appeared unexpectedly, hit the con men over the head with a snow shovel, and saved Kevin from his incompetent enemies.

How could Kevin’s story possibly have anything to do with estate planning? First, he learned about a threat. Then, he developed a plan to address that threat. Finally, he diligently executed that plan. With some timely help, he succeeded in protecting himself and his home.

You and Kevin are more alike than you realize. Your home is at risk. While it’s unlikely that a couple of con men have been casing the place, your home is subject to more serious threats. And it’s not just your house that’s vulnerable. Your bank accounts, retirement accounts, and investments are all at risk.

Benjamin Franklin warned about two certainties in life for which everyone must plan—death and taxes. A third threat you must anticipate is the need for long-term care and the high costs associated with that care. These three threats to your home and other assets are much more dangerous than the hapless burglars Kevin fended off with his traps.

To protect your home and other assets from these threats, you need a plan. First, your plan must be designed to keep your estate out of probate court at the time of your death. In Arkansas, the high costs, long delays, and total lack of privacy associated with the probate process make this step crucial. Some families find a trust to be a good solution for this problem. 

Others make creative use of specialized deeds and beneficiary designations to steer clear of probate. But one way or another, protecting your home and other assets from probate at the time of death should be part of your plan.

Second, your plan must consider the tax ramifications of your actions. From a tax perspective, there are good ways to pass on your home and assets to the next generation and there are bad ways. Seek competent advice to ensure that you do not create a capital gains or an income tax problem for those who will eventually inherit your estate. What good would it have done Kevin to protect his home from burglars if he had burned it down in the process?

Third, your plan must provide some protection against the high costs of long-term care to ensure you still have assets to pass on when your journey comes to an end. Many “standard” estate plans are designed to address probate and tax issues but leave families vulnerable to this risk, but a good elder law attorney will address all three risks to your home and other assets.

The motivation to take action must start with you, but just like Kevin, you’ll need some help along the way. Don’t count on a friendly acquaintance to show up in the right place at the right time with a snow shovel. Actively seek out expert advice. If you’d like to learn more about what it takes to have a plan that won’t fail you when you need it most, but that instead will protect your home and other assets from all three major threats, call for a no-charge strategy session.